Bertelsmann just can’t seem to make an impact in the German TV market,
Alasdair Reid writes
Commentators are always quick to deride Bertelsmann’s efforts to become
a major force in European broadcasting. They point in particular to
faltering efforts in its home market in Germany. One of its television
channels, Vox, was on the verge of bankruptcy two years ago before
Rupert Murdoch was invited to step in and take control; another, the
massively profitable RTL, is a success largely because of the efforts of
its other major shareholder, CLT.
Now Bertelsmann looks as if it has fallen behind in the race to launch
digital services in Germany, and efforts to merge its broadcasting
subsidiary, Ufa, with CLT in a strategic European alliance have run into
trouble. Last month, Michel Delloye, CLT’s chief executive and the man
responsible for hammering out the initial deal, resigned after
disagreements about who was to manage the joint venture.
Even worse, last week Bertelsmann’s arch-rival, Kirch, joined forces
with Rupert Murdoch’s BSkyB to set up a joint pay-TV venture to launch
17 channels in Germany. The new venture has one million ‘D-box’ set-top
decoders ready to go to market, whereas Bertelsmann’s 100,000 MMBG boxes
ordered earlier this year are not yet ready. Neither are programme
plans; and Kirch, which owns one of the world’s biggest programming
libraries, is ahead in this area. Ironically, the station best suited to
digital upgrade, the pay-TV channel, Premiere, is jointly owned by CLT,
Bertelsmann and Kirch, and none of the sides is keen to let it become
the centrepiece of its rivals’ plans.
Bertelsmann, say the critics, may be one of the world’s biggest media
owners, but historically it is a print-based company and it hasn’t quite
managed to get the hang of television. Two thirds of Bertelsmann’s
dollars 539 million worldwide profits last year came from publishing and
related activities. Through Gruner and Jahr it is a major magazine
publisher, owning the Bantam Doubleday Dell book-publishing group, and
it is the world’s biggest operator of book clubs, including BCA in the
Britain. It is a force to be reckoned with in music publishing too,
owning RCA and Arista Records and running a host of CD clubs around the
So why does it find broadcasting so difficult? Most analysts point to
its corporate culture. Bertelsmann is a bureaucratic and stolid
corporation, managed by committees that hate taking risks. One senior
television executive said recently that negotiating with Bertelsmann is
‘like wading through porridge’. Its approach is personified by its
chairman, Mark Wossner, who is described by one insider as ‘reserved and
formal, a businessman with old-fashioned German virtues’.
No-one, though, should underestimate Bertelsmann or its determination to
succeed. The digital race is likely to be a marathon rather than a
sprint and the Ufa-CLT merger could be the most important factor in its
outcome. The deal is currently being investigated by both German and
European monopolies watchdogs, but if it goes through it will begin to
simplify a complicated web of relationships between Europe’s major media
One of CLT’s largest shareholders, for instance, is Havas, which owns
Canal Plus, a world leader in subscription television. Canal Plus is
about to launch digital services in France. But CLT recently signed a
deal with a consortium of French channels, including the biggest, TF1,
to develop a rival digital offering. In turn, Canal Plus and Bertelsmann
are joint-venture partners in a company called Newco, set up recently to
develop digital broadcasting opportunities across the whole of Europe.
(BSkyB had also been a partner in Newco, but it left recently to seek
other alliances, resulting in the partnership with Kirch.) Both Canal
Plus and CLT are shareholders in MMBG.
Confused? You will be - and it will probably get more complicated before
it starts to resolve itself. Wossner is currently trying to play a
delicate diplomatic game - particularly in trying to keep links with
Canal Plus, despite CLT’s French manoeuvres.
The merged Ufa-CLT company will have a majority shareholding in
Premiere, which could mean that it ends up on the MMBG digital package
whether Kirch likes it or not. The merger would also underwrite
ambitious programming plans at RTL - already Germany’s most popular
channel - and clear the way for it to become the jewel in the MMBG
The German digital race is vitally important to Bertelsmann’s broadcast
strategy. The winners in Germany will be able to export the lessons
learned to the other major European markets, whose digital development
has been proceeding at a slightly slower pace.
But technology is one thing, content is another. The company that
controls the digital television business will be best placed to dominate
all facets of the media market well into the next century, but the
battle will have far more to do with programming than with set-top
Can Wossner succeed in his aim to control the digital television
business in Germany, and export this to the rest of the world? Some say
that it will be a bit like British Satellite Broadcasting versus Sky in
the early days of UK satellite broadcasting - a compromise or merger is
inevitable. But it will take nerve. Cautious Bertelsmann has just
embarked on the riskiest venture in its history.
Its Ufa subsidiary has shareholdings in several German television
channels including 39 per cent of RTL, 8 per cent of RTL2, 24.9 per cent
of Vox, 37.5 per cent of Premiere, 25 per cent of CBC Cologne. It is a
leading player in the MMBG digital TV system. It has stakes in the
Luxembourg channel, Fratel, and Tele Monte Carlo. Ufa also has
television production studios in Berlin, Hamburg, Cologne and Budapest,
and a German regional radio network. A merger with CLT will give Ufa
stakes in Channel 5 (UK), M6 (France), RTL4 and RTL5 (Holland).
Gruner and Jahr divisions in Germany (top titles include Stern, Brigitte
and Geo) and throughout Europe. McCall’s and Family Circle in the US.
Six regional newspapers in Germany.
Bantam Doubleday Dell worldwide. Authors include John Grisham and
Arista Records and RCA.
Business Publishing/Books/cd clubs
Trade magazine divisions in Europe plus technical books and online
information services. World’s largest operator of book clubs, including
BCA in the UK. Bertelsmann also has a home video sales and distribution
business and an interactive CD-Rom publishing division. Its 50/50 joint
venture with America Online is a European web service provider set up to
rival Compuserve and Microsoft.